A collection of best practice articles to help grow companies with an emphasis on finance. The goal of the blog is to explain how these best practices work, enabling anyone to put these ideas to immediate use. Articles are written by Matt H. Evans, CPA, CMA, CFM

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NOTE: Effective January 1, 2017, I will no longer post new articles since I am now fully retired.

Wednesday, January 14, 2015

Lessons from the Entrepreneur - Part 2 of 3

Seven key characteristics of an Entrepreneur

In our first lesson, we described a few basic concepts that
entrepreneurs follow in managing a business. We will now expand on how
entrepreneurs create value by looking at some characteristics of
entrepreneurs. One common characteristic behind almost every
entrepreneur is a strong commitment to a set of skills. Invariably you
will find that entrepreneurs are extremely highly skilled in their
chosen profession and as a result, they can attract customers based on
this high level of expertise. Entrepreneurs are able to exploit this
expertise and build a business around what they are good at.
Entrepreneurs do not digress or move into areas where their skills are
weak. If an entrepreneur requires other skills, the entrepreneur will
seek out partners or build a management team. Keep in mind that almost
every entrepreneurial business will require at least three skills:
marketing, product, and finance. You have to be able to sell and reach
the customer. You have to be able to create a product that creates value
for the customer. Finally, you must be able to raise the money to
execute your business. Entrepreneurs know how to cover all three of
these skills.

Another common characteristic to most entrepreneurs is a love for what
it is they do. Entrepreneurs have a passion for their work which helps
them persevere through hard times. This strong commitment allows
entrepreneurs to compete and overcome numerous obstacles. Failure is
part of the process of building the entrepreneurial business. Most
entrepreneurs will experience a lot more failures then successes.
However, they persevere through failures by learning from failures and
they build on this new knowledge. Therefore, "intelligent" failing is an
integral part of how entrepreneurs create value.

A third characteristic common to most entrepreneurs is a low resource
need. Entrepreneurs are customer dependent and not resource dependent.
Entrepreneurs seem to create value with minimal resources. This low
support need is one of the reasons why so many entrepreneurial
businesses create so much value. Contrast this to the big corporation
where huge resources are plowed into projects, resulting in wasted
resources and the destruction of value. Entrepreneurs create businesses
with minimal capital investments. This in turn generates an extremely
high return on invested capital and thus, high valuations for the
business.

In summary, we can list several characteristics common to entrepreneurs:

- Extremely high skills resulting in benefits to customers.
- Strong commitment to building value with failure as a normal part of the process.
- Low support needs and thus, high valuations are possible.
- Focused on the needs of the customer. The customer is the ultimate solution within every business.
- Does not follow a pre-set path or structure; experiments through a meandering journey.
- Informal, open communication style that allows a conversation to take place and thus, entrepreneurs are always learning.
- Very sensitive to what works and what does not work. Entrepreneurs are very observant.

In our final lesson (Part 3) on entrepreneurship, we will look at how your organization can create an entrepreneurial culture.